Yesterday, the problems in the Cyprus property market were discussed at a meeting attended by government Ministers, trade unions and other interested parties. The meeting heard that some 20,000 properties remain unsold and that a large number of others remain unfinished due to the dramatic decline in sales and worsening market conditions.
Chairman of Leptos Group, Michael Leptos, said that around 20,000 construction industry employees had already received their dismissal notices and, referring to a survey carried out among 90 companies, that 3,000 more will be dismissed by June. He also reported that there were 20,000 unsold apartments on the market, although he didn’t explain were his numbers came from. He urged the government to conduct a study to uncover the real size of the problem and the amount of money that the state is losing from unsold holiday homes.
In an effort to scope the extent of the problem the chairman of Land Developers Association, Lakis Tofarides, said that in 2007 the construction industry had a turnover of €2 billion and contributed some €500 million to state coffers. In 2008 property sales were down by more than half, while in 2009 sales will be less than a quarter of those achieved in 2007.
All of those attending the meeting agreed that the government’s proposals for strengthening construction sector must be adopted as soon as possible and that tax incentives must be offered to avoid a deepening of the crisis.
Approximately 20,000 new properties are built each year in Cyprus. Given the current financial crisis and the dramatic drop in the numbers of properties being sold, it’s going to take a very, very long time to offload the 20,000 unsold properties on the market at the present time.
The fall off in property sales started towards the end of 2007, but rather than gearing supply to meet that falling demand developers continued to build aggressively throughout 2008 in spite of the worsening signs in the market.
It seems that the business model developers have been using to gear their production is fundamentally flawed and has resulted in a situation where the supply of property far exceeds demand. Only now do they see the error of their ways and are urging the government to bail them out.